It Is Easy to Imagine That a Financial Manager Would

question 102

Essay

It is easy to imagine that a financial manager would be reluctant to abandon a project in which large sums of money have been invested with no cash return. Discuss the important concept here that should be the manager's guiding policy.

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Definitions:

Expected Rate

The anticipated return or yield on an investment or financial instrument over a certain period.

Real Holding-period Return

The total return on an investment, accounting for inflation, over the period it is held, reflecting the true increase in purchasing power.

Real Rate of Return

The rate of profit or growth rate after adjusting for inflation.

Nominal Rate

The interest rate before adjustments for inflation, as opposed to the real rate, which is adjusted for inflation.